Corporate and household borrowing has witnessed stable growth in 2011. The turnover of loans and leases granted to companies posted the highest growth rate in May at 630 million euros, increasing by over a third from previous months as well as from a year ago. The previous months saw growth in the level of short-term loans only, while in May also the volume of long-term loans issued to the real estate and construction sectors contributed to growth. The coming months will reveal whether this was a one-off development or a general change in borrowing activity.

Compared to companies, households express lower confidence and willingness to borrow. As in the previous months, the turnover of car leases continued to grow and reached 84% in May in annual terms. The turnover of housing loans, on the other hand, increased at a modest rate of 10% in May.

The loan and lease portfolio of banks increased for the first time over the past year and a half owing to increased borrowing, and totalled 14.8 billion euros at the end of May. Both the corporate and housing loan segments recorded growth, while the portfolio of consumer credit shrank further. The loan and lease portfolio contracted in the previous months as well, and so in May it was 6% smaller than it was a year earlier.

Interest rates are still being shaped by diverging determinants: the rise in the Euribor on the one hand and the drop in interest margins on the other. The average interest rate on housing loans remained unchanged from previous months at 3.4% in May. However, the average interest rate on corporate loans declined to 4.0%, partly because of the increased share of long-term loans with lower interest rates, compared to previous months.

The quality of loans has not changed much. The percentage of loans overdue for more than 60 days in the loan portfolio continued to shrink, standing at 6.3% at the end of May. The percentage of loans overdue has decreased, both in the segments of corporate and household loans.

Along with the pick-up in borrowing, the annual growth in the volume of deposits is slowing, standing at 4% in May. The slowdown in growth mainly concerns corporate deposits, which contracted by 3% year-on-year. The volume of household deposits keeps growing at rates close to those in the previous months, with annual growth totalling 10% in May.

–>Figure 1. Corporate loans and leases issued in a month

Figure 2. The weighted average interest rate on housing loans and long-term corporate loans issued in a month and 6-month Euribor

Figure 3. The volume and annual growth of corporate and household deposits

Swedbank, the largest bank in Estonia, announced yesterday that it had decided to change its legal structure in reference to the bank’s three Baltic subsidiaries.

Among others, the company has decided to make Latvian and Lithuanian subsidiaries directly owned by Swedbank AB, like in the case of Swedbank Estonia. In connection with the changes, Swedbank in Estonia will pay 243 million euros in dividends that it earned from the operations in Latvia and Lithuania

Estonian power plants that burn biofuel are consuming about 1.2 million cubic metres of wood or about 15% of annual felling and since demand exceeds supply, the price of firewood has gone up by about 20% last year.

The situation will worsen further when the new power plant of Eesti Energia is started in 2015 since it will be burning half firewood and half oil shale.

The ministry of interior has announced it plans to set the quota for immigrating foreign business executives at 580 people for this year, writes Postimees.

This year about 500 people have already obtained Estonian residence permit as business managers of foreign companies.

Since in January the government set that the immigration quota for this year will be 1,008 people, it means that if the trend continues with the current pace, it would be the only way for foreigners to apply for a residence permit

In the first quarter of 2011 direct investments in the amount of 427 million euros flowed into Estonia while Estonian residents’ direct investments abroad totaled 195 million euros. The inflow of direct investment exceeded the outflow by 232 million euros, the Bank of Estonia said.

Three quarters of the increase in direct investment was related to reinvested earnings reflected in the current account as outflow of income. Equity investment accounted for 6% of the inflow of direct investment.

The structure of residents’ direct investment abroad was somewhat different from that of nonresidents’ direct investment in Estonia: direct equity investment made up 30% and reinvested earnings and the movement of loan capital within cross-border groups 35% each of total direct investment abroad during the quarter.

In 2010 54% of the territory of Estonia was covered by forest and other wooded land, with which the country ranked high among the member states of the European Union that have the greatest proportion of forest cover, figures published by Eurostat on Wednesday show.

The EU member state with the highest percentage of territory covered by forest in 2010 was Finland, with a ratio of 77%. Sweden came next with 76%, followed by Slovenia with 63%, Latvia with 56%, and Spain with 55%. In all other EU member states, the ratio was lower than 50%. At the bottom of the table came Malta with 0.5%.

Forests cover 11% of the territory of the Netherlands, 12% of the territory of the UK and Ireland and 14% of the territory of Denmark.

In 2010, forest and other wooded land covered 178 million hectares in the EU27, or around 40% of its land area.